There is lots of research and studies analyzing female entrepreneurship, women in business, and the gender gap in today’s working world. Nadine Chochoiek is a scientist working on all of these topics and more. She holds two Master’s degrees and is currently writing her dissertation, while also working as Project Manager for the LMU Entrepreneurship Center in Munich. She also works as a coach and consultant for both corporations and startups. It’s safe to say that she’s a strong woman, tackling business and science. In our interview, we asked her about scientific findings around female entrepreneurship and women in business.
There are only 15.7% female founders in Germany. Why is the number of female entrepreneurs that small?
There are some supposedly obvious reasons that are frequently used to answer this question. Among them are the lack of knowledge and ability – which is definitely not the case for female entrepreneurs: According to the World Economic Forum, we have finally achieved educational parity between genders. In addition, a study by the Boston Consulting Group and MassChallenge shows that while startups founded or co-founded by women acquire less investments, they tend to be more successful as they generate more revenue than their all-male counterparts.
Another frequently used reason for the imparity between male and female entrepreneurship activity is the assumption that career and family can’t go together – the latter usually ascribed to women. However, looking at the numbers from the current German Startup Monitor, founders are actually quite content with their work-life balance and they do have children.
What´s left are discrimination issues, as well as psychological traits. These two reasons cannot be ruled out as easily and have – to a large extent – the same roots. When I am talking about discrimination I don’t mean that there are evil people in crucial roles like investors or customers that consciously dislike women and do everything to prevent their success. What I am talking about is a phenomenon which is much more latent, and therefore also hard to get rid of: unconscious bias. Unconscious bias refers to learned stereotypes which are automatic, unintentional, and deeply ingrained within our minds – we are all affected by it. In a highly complex world like ours, we gather millions of bits of information. Processing all this would overstrain our brain. It therefore uses shortcuts, unconsciously categorizing and formatting information into familiar patterns. These patterns, in turn, are shaped by our surroundings and our society. So if you think of a CEO or highly successful entrepreneur, you will probably not think of a woman. This is because we were socialized in a world where men are used to being the ones doing business and women are in charge of keeping the house clean and raising the kids. Luckily, the world has changed, but these stereotypes still persist in our subconscious.
Another unfavorable effect of our socialization is a gender gap in personality traits such as confidence and risk propensity which are crucial elements along the entrepreneurial journey.
Do you think that we do enough to empower female entrepreneurs in Germany and what should we do to accelerate this process?
I actually don’t think we really need to empower female entrepreneurs, because they are already out there and are really good at what they do. What we should do is talk more about them to overcome the unconscious bias and inspire other women (and men) who might have great ideas, but are still hesitant towards making the big step into entrepreneurship.
What could we do better? What kind of support would be necessary to foster female entrepreneurship in Germany?
One option here is rather obvious: the support of each other! Historically, women have not been allowed in any kind of networks such as gentlemen clubs or think tanks where business is actually happening (according to Networkwise, 57% of all jobs are actually filled through a networking contact). However, in recent years, more and more business networks such as Global Digital Women or the Business Women’s Society have been established to overcome this hurdle. They aim at connecting women (and men!) across different industries, enabling exchange and the visibility of different career paths.
Moreover, capital is always a constraint in entrepreneurship. It is apparently easier to get a loan for a modification of a kitchen than for a new venture. So we definitely need more innovative solutions in this domain – for both women and men.
What are the main obstacles female founders/ entrepreneurs have to face? Is there a difference compared to men?
There are several obstacles every startup founder has to face. First and foremost, the lack of resources is always a challenge for founders. Yet most of the female entrepreneurs are actually bootstrapped and not really looking to get external funding, but rather build a solid and sustainable business. I would argue that the main obstacle that women have to overcome is themselves. There are several studies out there showing that women tend to underestimate their abilities and therefore shy away from entrepreneurship – while being objectively equally able as their male counterparts.
Only 8% of investors and business angels in Europe are women. Do you think that this is the reason for the lack of female founders?
I believe this might be part of the problem, but definitely not the whole story. Sure female investors obviously know more about the female target group and therefore the potential of female products should be more likely to foster female entrepreneurship. However, first of all not all female founders develop products or services for a female target market. In addition, there is some evidence that also women suffer from unconscious bias that possibly ascribes less ability to female founders.
A recently published study concluded that women are insofar disadvantaged when it comes to venture capital funding as investors – both male and female – tend to ask them different questions depending on their gender: when questioning female entrepreneurs, investors embraced a prevention orientation, which is concerned with safety, responsibility, security, and vigilance. In contrast, they adopted a promotion orientation when quizzing male entrepreneurs, which means they focus on hopes, achievements, advancement, and ideals. The problem is that the type of question also predicts the type of answer. By responding in kind to promotion questions, male entrepreneurs reinforce their association with the favorable domain of gains; female entrepreneurs who respond in kind to prevention questions unconsciously penalize their startups by remaining in the area of their startup’s losses.
Are there cultural differences or differences when you have a look at different countries? Which countries should we look to as positive role models?
If you consider the current numbers from the Global Entrepreneurship Monitor, you can see that most of the countries in the world struggle with a low share of female entrepreneurs. In only six countries (Indonesia, Thailand, Panama, Qatar, Madagascar, and Angola) women report equal or higher entrepreneurship rates than men. However, this is driven by the local economic conditions so that companies are being started out of necessity. For most of the Western and developed world, new ventures are rather founded out of opportunities. We find similarly low numbers of female entrepreneurship here – not even the supposedly gender-equal nations such as Sweden show different rates. Rather than focusing on different countries, I would suggest to look around yourself and recognize the role models that are closest to you.
Is there a difference concerning age? Do business women start their company when they are older compared to when men start their business, as an example?
Yes, that’s true. In Germany, female founders tend to be slightly older than their male counterparts. The average age of female founders is 36.3 years, whereas, male founders have an average age of 35.1 years. (Female Founders Monitor)
Why do women start companies? What is their motivation?
We know that women tend to foster social goals when founding a company. In addition, they are often motivated by a solution to a problem they encounter themselves. Rather than making much money and starting with the billion-dollar exit in mind, they aim at building a sustainable and solid business.
Are there differences when we look at the different industries? Are there any “female industries”?
Yes, for sure. As to be seen from the Female Founders Monitor, there is still a lack of women in tech. On the other hand, far more women are engaged in e-commerce and education than men. In addition, according to the OECD, female founders are two and a half times less likely than their male counterparts to employ others and are therefore not always considered entrepreneurs rather than small business owners. In Germany, for example, the majority of female founders are engaged in personal services (KfW, 2014).
Who are the better leaders in your opinion, and why – women or men?
I do not believe in the whole men against women movement. In my opinion, this is also why many feminist initiatives are frowned upon – especially by men. We should aim for diversity because this is what fosters innovation, firm performance, and job satisfaction – not the mere push of women.
If you could change two major things in order to accelerate the closing of the gap, what would they be?
Eliminate unconscious bias and overcome the confidence gap.